Worst over for Vietnam economy, says HSBC report

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Vietnam's economy is bouncing back, according to a report by HSBC, which says manufacturing grew for the first time in five months.

The "Vietnam at a glance" report said the country, once considered an Asian tiger, might not roar yet, but there are signs the worst is behind it.

The HSBC Vietnam Purchasing Managers' Index (PMI) issued earlier this month showed that manufacturing is expanding, with gains in new orders, exports, and employment, and output is stable.

The indicator rose above the 50.0 no-change mark during September to 51.5, up from 49.4 in August to hit the highest level since April 2011 when survey data was first available.

PMI provides an overview of activity in the manufacturing sector, and thus acts as a leading indicator for the whole economy. 

The new report shows a record increase in new orders, including foreign sales, and employment.

It said better product quality and competitive pricing, which has been in a downtrend for six consecutive months, helped sales growth, which in turn helped increase payrolls in the sector.

Manufacturers have managed to reduce their stockpiles. There were even reports of stock shortages by some suppliers in September.

Third quarter manufacturing grew 8.6 percent year-on-year, as foreign direct investment rose 52.2 percent to US$9.3 billion, thanks partly to low labor costs.

Increases in fuel and utility costs added 1 percentage point to inflation, but HSBC said it is not a matter of concern since the government is keen on containing it.

HSBC experts forecast GDP growth of 5.2 percent this year and 5.4 percent in 2014. The figure hit a 13-year low last year of 5.03 percent.

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